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    Question

    If a firm has 100 in inventories, a current ratio equal

    to 1.2, and a quick ratio equal to 1.1, what is the firm's Net Working Capital?
    B 100 Correct Answer Incorrect Answer
    C 200 Correct Answer Incorrect Answer
    D 1200 Correct Answer Incorrect Answer
    E 1000 Correct Answer Incorrect Answer

    Solution

    Current Ratio = CA/CL=1.2 CA= 1.2CL -------(1) Quick Ratio = (CA-100)/CL=1.1 Equating (1) in quick ratio will give: 1.2 CL-100 / CL = 1.1 CL = 1000 So, CA will be 1.2 CL i.e., 1.2 * 1000 = 1200 WC = CA-CL 1200-1000 = 200

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